The Berkeley Group Holdings plc Full Year Results Presentation Year ended 30 th April 2017 21 st June 2017
Preliminary Results Presentation Format of Presentation Tony Pidgley CBE Chairman Richard Stearn Finance Director Rob Perrins Chief Executive Questions Highwood, Horsham, West Sussex
Tony Pidgley CBE Chairman
Richard Stearn Finance Director
Finance Review Introduction - Summary of performance - Summary of financial position - Future potential share dilution - Homes completed and Average Selling Price - Income statement - Abridged cash flow - Abridged balance sheet - Inventories - Creditors - Financing - Land holdings
Finance Review Summary of Performance Year ended 30 Apr 2017 30 Apr 2016 Change (£) Change (%) Profit before tax £812.4m £530.9m +£281.5m +53.0% EPS – Basic 467.8p 295.8p +172.0p +58.1% EPS – Diluted 451.4p 268.7p +182.7p +68.0% Operating Margin 27.8% 24.5% Return on equity * 41.1% 30.8% * Return on equity is calculated as profit before tax divided by the average of opening and closing net assets
Finance Review Summary of Financial Position April 2017 April 2016 Change (£) Change (%) Balance Sheet Shareholders’ funds £2,136.9m £1,812.8m +£324.1m +17.9% Closing net cash (£285.5m) (£107.4m) +£178.1m Capital Employed £1,851.4m £1,705.4m +£146.0m +8.6% Net asset value per share 1,556p 1,314p +242p +18.4% Shares in issue 140.2m 137.9m Cash due on forward sales £2.74bn £3.25bn -£0.51bn -15.7% Land Holdings Plots 46,351 42,858 +3,493 +8.2% Gross Margin £6.4bn £6.1bn +£0.3bn +4.9%
Finance Review Future potential share dilution Vesting No. (million) Approved by shareholders Date Shares in issue at 1 May 2016 (net of Treasury and EBT shares) 137.9 September 2016 2011 LTIP vestings – Tranche 1 1.8 September 2011 Share buy-backs – June 2016 (0.9) February 2016 Share buy-backs – Shareholder return (1.5) Shares in issue at 1 May 2017 137.3 2011 LTIP vestings * September 2017 0.8 September 2018 0.8 September 2019 0.8 September 2011 September 2020 0.8 February 2016 February 2017 September 2021 0.8 September 2022 0.6 September 2023 0.6 142.5 * Net options vesting is based on an illustrative share price of £32.50. This slide assumes no further share buy backs.
Finance Review Homes Completed and ASP – Group Homes 3,905 3,742 3,776 3,712 3,355 2,294 2,076 2,091 1,983 1,927 1,829 1,785 1,685 1,448 1,372 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 2012/13 2013/14 2014/15 2015/16 2016/17 Berkeley Group Average Selling Price £697k £675k £649k £655k £575k £539k £523k £527k £515k £506k £423k £376k £354k £350k £335k H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 2012/13 2013/14 2014/15 2015/16 2016/17 Berkeley Group
Finance Review Homes Completed and ASP – Joint Ventures Homes 251 240 230 203 190 162 144 132 86 78 71 66 61 34 32 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 2012/13 2013/14 2014/15 2015/16 2016/17 St Edward Average Selling Price � £1,520k £1,484k £1,464k £1,380k £1,329k £1,321k £1,235k £1,229k £1,139k £1,006k £810k £702k £272k £282k £277k H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 2012/13 2013/14 2014/15 2015/16 2016/17 St Edward
Finance Review Income Statement Year ended Apr 2017 Apr 2016 Change Change £m £m £m % Revenue 2,723.5 2,047.5 +676.0 +33.0% Gross profit 939.8 701.7 +238.1 +33.9% 34.5% 34.3% Operating expenses (183.6) (199.8) +16.2 -8.1% 6.7% 9.8% Operating profit 756.2 501.9 +254.3 +50.7% 27.8% 24.5% Net finance costs (7.6) (7.5) -0.1 Share of Joint Venture results 63.8 36.5 +27.3 Profit before tax 812.4 530.9 +281.5 +53.0% 29.8% 25.9% Tax (167.3) (126.8) -40.5 20.6% 23.9% Profit after tax 645.1 404.1 +241.0 +59.6%
Finance Review Abridged Cash Flow Year ended April 2017 April 2016 £m £m Profit before tax 812.4 530.9 Increase in inventory (227.3) (602.0) (Decrease) / increase in customer deposits (130.9) 184.9 Other working capital movements 125.1 (21.2) Net investment in working capital (233.1) (438.3) Net receipts from / (investment in) joint ventures 15.0 (63.2) Tax paid (115.6) (100.8) Other movements 18.5 7.4 Cash inflow / (outflow) before share buy-backs and dividends 497.2 (64.0) Purchase of own shares (64.5) (4.8) Dividends (254.6) (259.5) Increase / (decrease) in net cash 178.1 (323.5) Opening net cash 107.4 430.9 Closing net cash 285.5 107.4
Finance Review Abridged Balance Sheet April 2017 Movements April 2016 £m £m £m Non current assets - Intangible assets 17.2 - 17.2 - Investment in JVs 135.0 -15.0 150.0 - Deferred tax assets 59.4 -12.5 71.9 - Property, plant and equipment 22.8 -0.7 23.5 Total non current assets 234.4 -28.2 262.6 Inventories 3,483.4 +227.3 3,256.1 Debtors 229.5 +17.2 212.3 Creditors and provisions (2,095.9) -70.3 (2,025.6) Capital employed 1,851.4 +146.0 1,705.4 Net cash 285.5 +178.1 107.4 Net assets 2,136.9 +324.1 1,812.8 Net asset value per share 1,556p +242p 1,314p
Finance Review Inventories April 2017 Movements April 2016 £m £m £m Land not under development 414.1 +30.0 384.1 Work in progress: Land cost 919.0 -56.8 975.8 1,333.1 -26.8 1,359.9 Work in progress: Build cost 2,062.7 +184.6 1,878.1 Completed units 87.6 +69.5 18.1 Inventories 3,483.4 +227.3 3,256.1
Finance Review Creditors April 2017 Movements April 2016 £m £m £m Trade creditors and accruals 760.6 +182.2 578.4 Provision for liabilities 99.9 +11.4 88.5 Deposits and on account receipts 974.9 -130.9 1,105.8 Land creditors 142.9 -31.8 174.7 Current tax liability 117.6 +39.4 78.2 Total liabilities before borrowings 2,095.9 +70.3 2,025.6 Borrowings 300.0 +300.0 - Total liabilities 2,395.9 +370.3 2,025.6 Land Creditors Land creditors < 12 months 73.7 -10.7 84.4 Land creditors > 12 months 69.2 -21.1 90.3 Total 142.9 -31.8 174.7
Finance Review Financing Banking Facilities Amount: £750 million Term: £300 million RCF: £450 million Maturity: November 2021 (with optional extensions to November 2023) Margin, utilisation and commitment fees: Market rates
Finance Review Land Holdings April 2017 Variance April 2016 Owned 33,771 -15 33,786 Contracted 12,580 +3,508 9,072 Plots 46,351 +3,493 42,858 Sales value £21.8bn +£1.0bn £20.8bn Average selling price (ASP)* £520k -£9k £529k Average plot cost £62k -£1k £63k Land cost % 13.2% +0.3% 12.9% Gross margin £6.4bn +£0.3bn £6.1bn GM% 29.3% -0.3% 29.6% * ASP reflects joint venture revenue at 100%
Rob Perrins Chief Executive
Strategic Review Introduction - Performance highlights - Macro backdrop and market fundamentals - The Market - Land and Build Investment - Joint ventures - Long term strategic plan - Guidance
Strategic Review Performance Highlights Highlights � Profit before tax up 53.0% to £812.4 million � Net assets of £2.1 billion and net cash of £285.5 million � Cash due on forward sales £2.74 billion (2016: £3.25 billion) � 3.8% growth in gross margin in land holdings to £6.4 billion (2016: £6.1 billion) Key messages � Strong results reflect decisions taken after the 2008 financial crisis to acquire land at the right time in the cycle � Berkeley is in great shape � Conditions support delivery of at least £3.0 billion of pre-tax profits in aggregate over the five years ending 30 April 2021 � Uncertainty and heightened macro risk not being reflected in the planning and taxation environments � Conditions for growth and lower barriers to entry are required to support increased delivery across all tenures
Strategic Review Macro back-drop and market fundamentals Global Political and Economic Instability UK Political Backdrop � Impact of the recent UK election result on domestic policies and Brexit negotiations remains to be seen � New starts in London falling – down some 30% from a year ago � Government support for housebuilding � Increasing planning demands from the combination of affordable housing, CIL, section 106 obligations and review mechanisms � SDLT changes and partial reduction in mortgage interest rate deductibility Market Fundamentals � London is and will remain a World City � Exchange rate movements have been favourable for overseas customers � Prevailing low interest rate environment with good mortgage availability � There is a shortfall of good quality new housing in London and the South East � Underlying demand is robust, albeit certain market segments such as the UK investor is currently subdued. � Supply constrained with high barriers to entry for small developers and new entrants
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